Airtricity owner SSE faces record £10.5m fine for mis-selling

UK utility giant SSE is to be fined £10.5m sterling for "prolonged and extensive" mis-selling in what will be the largest ever penalty imposed on an energy provider. SSE owns Airtricity here.

UK energy watchdog Ofgem said it found "failures at every stage of the sales process" across SSE's telephone, in-store and doorstep selling activities.

SSE provided "misleading and unsubstantiated statements" to potential customers about prices and savings that could be made by switching to SSE, according to Ofgem.

Ofgem said the level of the fine reflects the seriousness and the duration of the mis-selling, as well as the harm caused to customers and the likely gain to SSE.

Management at SSE - one of Britain's "big six" energy suppliers - failed to pay enough attention to compliance, which allowed the mis-selling to take place, added Ofgem.

"This is a woeful catalogue of failures by the SSE management,'' commented Ian Marlee, managing director for markets at Ofgem.

"This fine represents the fact that what they were doing was allowing a culture of mis-selling to continue, they weren't doing enough to prevent sharp selling practices from their selling agents, they actually provided misleading sales scripts,'' he said.

"Some people were being told they were going to get savings when actually they were being put on a worse deal. People were expecting savings and were not getting the levels of savings, people were being told direct debit levels that made it sound like they were going to be better off when in fact they were worse off,'' he added.

"What we need and what we expect from energy companies is they have a culture of putting consumers first and complying with the rules. Clearly SSE management were not doing that which is why we imposed the largest fine on energy suppliers we have ever imposed,'' he said.

The fine will be paid to the UK Treasury.

Ofgem found failings at all stages of SSE's sales processes, from the opening lines on the doorstep, in store or over the phone through to the confirmation process which follows a sale.

SSE's sales teams misled some customers into switching to the firm by telling them they were saving money when they were instead being put on to more expensive contracts.

Selling agents also exaggerated the potential savings by switching to SSE and lied about rival price increases, telling customers that other suppliers were making "all sorts of false promises".

SSE, which has around 10 million domestic customers in the UK, stopped doorstep selling in July 2011, but Ofgem said failures continued over the telephone and in store.

SSE said it was "deeply regretful that breaches occurred and apologises unreservedly to any customers who have been affected by sales activity which ran counter to the values and culture of the company".

It insisted its sales practices have been overhauled since Ofgem launched its investigation, but admitted that it did not move fast or far enough.

As well as halting all doorstep selling, SSE has also brought all domestic telesales in-house, launched a new training programme for sales staff and set up a post-sales verification process.

The group has restructured, creating a retail division and hiring externally to head up the new team, with a new director of sales also brought on board.

Bonuses were withheld for its three executive directors in 2012 as a result of the mis-selling breaches, it added.

SSE set up a £5m fund to cover mis-selling compensation claims and sent out 970,000 letters to existing customers last year alerting them to its compensation process. It said it had already paid out more than £400,000 to several thousand customers.

Ofgem has now finished two of four mis-selling investigations launched in 2010, but probes are still ongoing relating to Scottish Power and npower from this time, while it launched an investigation into E.ON's energy sales practices last April.